Photo of Varun Kannan

Associate in the General Corporate Practice at the Mumbai office of Cyril Amarchand Mangaldas. Varun can be reached at varun.kannan@cyrilshroff.com

Minimum Interest Rates on loans to foreign WOS – Need for Review

Inter-corporate loans granted by a company are regulated under Section 186 of the Companies Act, 2013 (‘2013 Act’). One important pre-condition relates to the interest rate thresholds prescribed under sub-section (7). Section 186(7) of the Act states that – “No loan shall be given under this Section at a rate of interest lower than the prevailing yield of one-year, three-year, five-year or ten-year Government Security closest to the tenor of the loan.

Section 186(7) effectively prevents a company from giving an inter-corporate loan at a rate of interest lower than the prescribed thresholds, i.e. the prevailing yield of one-year, three-year, five-year or ten-year government security closest to the tenor of the loan. This leads to multiple practical difficulties, especially in situations where a holding company wishes to provide funds to its foreign wholly owned subsidiaries (‘WOS’).
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New CSR Regime – Is it too prescriptive

The Ministry of Corporate Affairs (‘MCA’) notified the amendments made to Section 135 of the Companies Act, 2013 (‘the Act’) – via the Companies (Amendment) Act, 2019, and the Companies (Amendment) Act, 2020, on January 22, 2021.

On the same day, the MCA also notified the Companies (Corporate Social Responsibility) Amendment Rules, 2021 (‘new CSR Rules’). These Rules have made significant changes to the regulatory framework governing the monitoring and evaluation of CSR activities, and the utilisation of CSR expenditure.

In this blog, we shall focus on the new CSR Rules, and examine its implications for India Inc. The implications of the changes made by the new CSR Rules are analyzed below.
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The PMLA – is the net cast too wide

The Prevention of Money Laundering Act, 2002 (‘PMLA’) has undergone multiple amendments after it was brought into operation on July 1, 2005. Most recently, the PMLA was amended through the –

  • Finance Act, 2015 (‘2015 Amendment’)
  • Finance Act, 2018 (‘2018 Amendment’)
  • Finance Act, 2019 (‘2019 Amendment’)

These amendments aimed to plug loopholes in the operation of the PMLA – to strengthen the framework for tackling money laundering. In furtherance of this objective, the 2019 Amendment has clarified the definition of “proceeds of crime” under Section 2(1)(u). Amendments were also made to Section 45, following the Supreme Court’s decision in the Nikesh Tarachand Shah[1] case – which struck down the pre-conditions for bail prescribed under Section 45(1). Over the years, the list of “scheduled offences” under Schedule I of the PMLA has also been amended significantly. Another aspect that arises in many PMLA proceedings is the admissibility of statements made to investigating officers.
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Supreme Court on the admissibility of electronic evidence under Section 65B of the Evidence Act.

The recent instances of leakage of Whatsapp chats obtained during the course of investigation and their admissibility as evidence in a criminal trial has brought the issue of electronic evidence to the forefront. These Whatsapp chats have been leaked in the public domain at the investigation stage itself, even before the commencement of the trial. Considering these recent developments, the legal framework for electronic evidence merits further scrutiny.

Under the Indian Evidence Act, 1872, Section 65B prescribes a distinct framework that governs the admissibility of electronic evidence. There have been multiple litigations over the scope and ambit of Section 65B, with divergent views taken by the Apex Court.
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